2022 (12) TMI 613 - AT - Insolvency and Bankruptcy

Appellate Tribunal rejects Rehabilitation Scheme as Resolution Plan under Insolvency and Bankruptcy Code.

Pramod Kumar Pathak Versus ARFAT Petrochemicals Private Limited

The Appellate Tribunal upheld the Adjudicating Authority's decision that the sanctioned Rehabilitation Scheme dated 07.01.2005 cannot be considered a ... CIRP - sanctioned scheme of rehabilitation - contravention of the scheme - seeking liquidation of the corporate debtor - whether the same to be considered as the Resolution Plan - The learned Counsel for the Respondent refuting the submissions of learned Counsel for the Appellant submits that approved Rehabilitation Scheme is not a Resolution Plan within the meaning of IB Code. The Notification dated 24.05.2017 has been held to be in excess of jurisdiction of Central Government, hence, cannot be relied by the Appellant for filing Application under Sections 33 and 34. HELD THAT:- We are not in agreement with the submission of learned Counsel for the Appellant with regard to Notification dated 24.05.2017 that the judgment of the Hon’ble Supreme Court can be treated as only an obitor. The Hon’ble Supreme Court has clearly approved the view of the Appellate Tribunal that Notification dated 24.05.2017 travels beyond the scope of removal of difficulties provisions, which is law declared by the Hon’ble Supreme Court and is binding on all under Article 141 of the Constitution of India. The judgment of the Adjudicating Authority impugned in the present Appeal follows the judgment of the Hon’ble Supreme Court in M/s Spartek Ceramics India Ltd. vs. Union of India & Ors. [2018 (10) TMI 1660 - SUPREME COURT] When the Notification dated 24.05.2017, is not a valid Notification, there is no occasion to accept the submission that approved Rehabilitation Scheme dated 07.01.2005, which is foundation of the Application filed by the Appellant under Sections 33 read with Section 34 can be treated as a Resolution Plan within the meaning of IB Code. The very foundation of the Application filed by the Appellant under Sections 33 and 34 having been knocked out, the Application was rightly rejected by the Adjudicating Authority. No error has been committed by the Adjudicating Authority in rejecting Application filed by the Appellant under Sections 33 and 34. There is no merit in the Appeal. Issues Involved:1. Whether the sanctioned rehabilitation scheme dated 07.01.2005 is a Resolution Plan within the meaning of Section 5(26) of the Insolvency and Bankruptcy Code (IBC), 2016.2. Whether the Respondent has committed a breach of the sanctioned rehabilitation scheme, thus liable for liquidation under Section 33(4) of the IBC, 2016.Issue-wise Detailed Analysis:1. Whether the sanctioned rehabilitation scheme dated 07.01.2005 is a Resolution Plan within the meaning of Section 5(26) of the IBC, 2016:The Appellant argued that the Rehabilitation Scheme sanctioned on 07.01.2005 should be considered a Resolution Plan under the IBC, relying on the Notification dated 24.05.2017, which deemed such schemes as approved resolution plans. The Adjudicating Authority, however, concluded that the sanctioned Rehabilitation Scheme cannot be termed a Resolution Plan within the meaning of Section 5(26) of the IBC. This conclusion was based on the judgment of the National Company Law Appellate Tribunal (NCLAT) in Company Appeal (AT) (Insolvency) No. 160 of 2017, which held that the Notification dated 24.05.2017 exceeded the jurisdiction of the Central Government and was not related to removing difficulties in giving effect to the provisions of the IBC. The Supreme Court upheld this view, affirming that the Notification dated 24.05.2017 travels beyond the scope of the removal of difficulties provisions under the IBC.2. Whether the Respondent has committed a breach of the sanctioned rehabilitation scheme, thus liable for liquidation under Section 33(4) of the IBC, 2016:The Appellant claimed that the Corporate Debtor was in continuous breach of the Sanctioned Rehabilitation Scheme and unable to meet its responsibilities and liabilities towards creditors and stakeholders. However, since the Rehabilitation Scheme was not considered a Resolution Plan as per the IBC, the question of the Respondent committing a breach of the implementation of the Plan did not arise. Consequently, the Application under Section 33 of the IBC was deemed not maintainable. The Adjudicating Authority's decision to reject the Application was based on this reasoning, which was further supported by the Supreme Court's judgment in M/s Spartek Ceramics India Ltd. vs. Union of India & Ors.Conclusion:The Appellate Tribunal upheld the decision of the Adjudicating Authority, concluding that the sanctioned Rehabilitation Scheme dated 07.01.2005 cannot be considered a Resolution Plan within the meaning of the IBC. Therefore, the Respondent could not be held liable for breach of the scheme under Section 33(4) of the IBC. The appeal was dismissed, and the Notification dated 24.05.2017 was deemed to travel beyond the scope of the removal of difficulties provisions under the IBC, as affirmed by the Supreme Court.